After clearing the critical 1.2000 level in yesterday's trade EUR/USD remained well bid in European session racing to 1.2135 before profit taking brought the pair down to 1.2060.  In the absence of any meaningful economic news from either the Euro-zone or the US, the market is back to mulling over the Ben Bernake nomination for Fed Chairmanship. "Helicopter Ben" as he is quickly becoming known in the FX circles has raised doubts amongst certain market participants that he would strictly adhere to  the  hawkish monetary policy currently practiced by Mr. Greenspan. Despite Mr. Bernake's assurance that he is committed to continuity the market remembers well his famous 2002 speech during which he stated that government had the power of printing press at its disposal to manufacture currency if needed, and it is precisely these inflationary sentiments that worry some FX participants the most.

The EUR/USD is clearly caught in the cross currents between the greenback positive themes of higher interest rates and corporate funds repatriation and the negative possibilities of slowing US growth exacerbated by the prospect of stagflation. Nevertheless, the euro appears to have made a turn and we stand by our opinion that unless the EUR/USD once again recedes below the 1.2000 figure, the near term direction is more likely to be up rather than down.

Over in Japan the Merchandise Trade surplus printed better than expected 957 Billion vs. consensus of 850 Billion but the figure was still -21% below last years numbers as imports skyrocketed by 17% led by the rise in oil prices. Oil continues to weigh on the USD/JPY and until such time that is falls below the $60/bbl level, the yen is unlikely to make much progress against the greenback as the pair stays mired in the 115-116 zone.

Boris Schlossberg is a Senior Currency Strategist at FXCM.